Home loans set to climb
BORROWERS will soon be unable to find mortgage rates under 6 per cent, experts warned yesterday.
Online mortgage adviser mform.co.uk said even homeowners with a lot of equity and spotless borrowing records are beoming unable to find fixed-rate loans within 1 per cent of the Bank of England base rate, currently 5 per cent.
This is because the costs banks themselves face for borrowing cash have soared since the start of this month.
Francis Ghiloni, from mform, said: “Mortgage rates continue to rise despite concerted action by the Bank of England and it is unlikely there will be many fixed-rate deals left for below 6 per cent.”
Any mortgages which have managed to remain below this level are likely to charge huge arrangement fees. In some cases, that would be 3 per cent of the total value of the loan: on a typical £150,000 mortgage, £4,500.
Ghiloni added: “Borrowers are still looking for the certainty delivered by fixed rates but we’d urge people to consider variable products such as discount rates.”
As the credit crunch began to bite at the start of this year, lenders generally held back their best mortgage rates for
customers deemed low risk: those whose homes were worth considerably more then their mortgages, and who had never defaulted on repayments.
Now, all borrowers face interest hikes.David Hollingworth, from mortgage broker London & Country, said: “No matter what you’re position is, you’re going to be paying more for your mortgage.
“Swap rates — the interest rates banks must pay to borrow money — have rocketed by 0.5 per cent in just over a week. Now lenders are reacting to this. We will have to wait and see whether or not they come down again.”
Until the start of this week, financial markets had expected the Bank of England to raise the base rate of interest as high as 5.75 per cent over coming months in a bid to control soaring inflation.
Yesterday, however, the Bank’s governor Mervyn King indicated rates may be kept on hold despite high inflation because of the potential risk higher interest could pose to the UK economy.
In addition, Hollingworth said: “Homeowners may be tempted to stick with their lender’s standard variable rate (SVR) for a while in the hope that the cost of fixed-rate deals will come down later in the year but SVRs are normally the most expensive way of borrowing and you run the risk that fixed-rates could go up further.
“Trying to second-guess the market is impossible. Our advice is: If you see an affordable deal, go for it.”
